Overhauling GLCs to speed up Sabah’s growth
Published on: Sunday, July 17, 2022
By: Datuk John Lo
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Innoprise of Sabah Foundation deserves highest praises for its impressive 2021 performance, increasing its profits 4 times from RM112 million to RM424 million. This is no accident. It is due to economic leadership, excellence in management, improved governance and putting good people in the right places.
Most outstandingly, Hajiji has shunned playing politics with Innoprise, has concentrated on the bottom line. This is the right way to go, excellent model for other GLCs.
https://www.thestar.com.my/news/nation/2022/07/04/sabah-cm-calls-for-review-of-lopsided-deals-involving-state-agencies-glcs
https://www.dailyexpress.com.my/news/195577/hajiji-revamp-of-glcs-in-sabah-showing-results/
1st reason for Hajiji’s revamping GLCs.
Strategically sound and brilliantly logical. Hajiji is doing the most sensible thing a concerned government leader or an experienced corporate world would do with the GLCs. Top priority is to sort out the most important assets, especially those bleeding heavily in $$$$. There should be zero tolerance for perennial GLC losers. Close them down or privatise them. There are many GLCs in this category. Organise the better ones to get them to maximise profits/returns like Innoprise.
Many Sabah’s GLCs especially those in the critical sectors, can be reformed and transformed into major instruments of economic development, can swell the state government’s coffer and can enhance/expedite economic development. Singapore’s GLCs have been great contributors to its economic development, like Economic Development Boards, Tamasek, Singapore airline, SGinovate, Singtel, SMRT, ST engineering. Johor SEDCO which owns KPJ hospital which is an outstanding hospital group. It has more than 1,000 doctors and specialists. Sabah’s GLCs should be outstanding like them if the right people are in charge.
Sabah’s 250 GLCs cover all the important economic sectors. Many have been granted juicy monopolistic rights, given some of the most valuable, super prime commercial and housing lands in Kota Kinabalu at nominal premium, choiciest agriculture lands and most favourable terms and conditions in business. There is no reason for most of the GLCs to have failed to make decent profits. Worst, making losses and needing bailouts by government year in year out.
We will need a Royal Commission of Inquiry to ascertain all the losses, in $, opportunity cost, loss of valuable lands by lopsided JV agreements, profits that should have been made and debts that should have been avoided. Conservatively, these figures will run into tens of billions.
Johor SEDCO has KPJ in Sabah. Can our GLCs establish a presence in Johor? If not, why not?
2nd reason for Hajiji’s revamping GLCs.
Quite easy to imagine the benefits if Hajiji can turn the around some of the bigger GLCs like what he has done with Innoprise. GLCs are in all the important sector of the economy as can be seen below:
[a] Manufacturing [YS, SEDCO], [b] Insurance [Progressive Insurance], [c] Oil and Gas [YS, SOGIP, SOGDC], [d] Petroleum Retail [YS], [d] Building Materials [SEDCO-CIS], [e] Banking/Finance [SDB, SCC, Borneo Housing], [f] Property Development [SEDCO-SUDC, Sabah Housing Development, KOSAN, USIA, MUIS, YS], [g] Oil Palm [YS-Sabah Soft Wood, SLDB, Sawit Kinabalu, USIA], [h] Fishery [SAFMA], [i] Hotels/Resorts/Tourism [YS, Sabah Air, SEDCO], [j] Agriculture [KPD], [k] Dairy [DESA Cattle], [l] Aviation [Sabah Air],. [m] Ports [SABAH PORTS AUTHORITY, SURIA, POIC], [n] Communication [Qhazanah-Communication Tower], [o] Renewable Energy/Dam [Qhazanah], [p] Trade/Retail [Qhazanah], [q] Education [YS], [r] Industrial Parks [SEDC-KKIP, POIC], [s] Fertilizers [SEDCO], Industrial Tree Plantation [YS-Sabah Softwood, SAFODA]
Above is a mere sample, definitely many more.
Now you have an idea of the extensiveness and dominant positions of GLCs in the Sabah’s economy. They control a very big chunk, the juiciest parts of Sabah’s economic pie. But most of them are underperforming and not producing the profits.
Now please imagine further [a] the value of assets of these GLCs. [b] The inherent value of their monopolistic positions. [c]the savings from their losses each year. [d] their profit potential if Hajiji can succeed in turning them around.
If the GLCs don’t perform, a large part of Sabah’s economy will be in the doldrum.
3rd reason for Hajiji’s revamping GLCs.
If Hajiji can turn around all the GLCs, he would have solved a huge economic problem for Sabah.
This is the reality. The GLCs have become such a huge part of the government and the economy of Sabah. These are the bottom line—-[a] Sabah’s progress is being greatly impeded by non-performing GLCs. [b] The GLCs should be reformed and transformed into agencies for Sabah’s economic development, especially those with monopolistic privileges.
Great potential contributions of GLCs.
Sabah’s GLCs is 250 or more. Many of them can make hundreds of millions like Innoprise. A few GLCs have potential to be profit making like well managed conglomerates in the private sector, for example: SEDCO.
If on average each GLCs can make RM10m, which is within reason considering their assets, monopolistic privileges and sweet-heart deals from government. Total profit is RM2.5 billion.
Reorganise GLCs into a coherent economic force.
So much valuable assets, so much financial potential. So much inefficiency. So much duplication. So little coordination. It is time for a serious review and reset the GLCS to mould them into a rationalised cohesive economic force.
Corporate standards, system and peer standards for all GLCs.
The GLCs’ myriad and diversity of business and commercial activities are everywhere. Their assets and potential returns on investment/assets are unimaginable. To make sense of all the GLCs and mould them into an economic coherent force will require a very high-power committee at Ministry of Finance consisting of top professionals, relevant industrial experts, experienced businessmen and very senior civil servants with relevant experience. Its focus is macro management on corporate standards, governance, system and peer standards.
Sabah Forestry Department has pioneered implementation of economic value chain.
Hajiji has announced his ITP and downstream industrialization policy in his keynote address at the SIBES on 17th January 2022. His policy objectives are to produce 80,000 skilled and unskilled jobs for Sabah, generate RM12 billion annual GDP and investment of more than RM10 billion by planting 400,000 hectares of trees. Hajiji’s policy will herald the birth of an exciting sunrise timber industry for many young Sabahans and businessmen.
Datuk Fred Kugan, the Director of Sabah Forestry Department in collaboration with Timber Association of Sabah and Sabah Economic Advisory Council, have pioneered the first ever usage of the economic value chain analysis in the implementation of Hajiji’s ITP and downstream industrialisation policy. This economic value chain will map out where and how Sabah can benefit implementing his ITP policy. It will prevent Sabah from being exploited, short changed and will prevent recurrence of the total lack of downstream in the oil palm industry, Mamut Copper mine and oil/gas.
Datuk Fred Kugan’s initiative is worthy of emulation.
Good for Sabah if the GLCs can adopt the economic value chain analysis for their business/projects.
Stop the politics, concentrate on economic development.
Masidi is absolutely correct, stop the politics, let’s focus on developing our state. All the Chairmen and Board of Directors of GLCs can contribute a big boost towards our economic development if they follow
Masidi’s advice and support Hajiji’s drive to reform and transform the GLCs. If Innoprise can do it, other GLCs also CAN.
- The views expressed here are the views of the writer Datuk John Lo and do not necessarily reflect those of the Daily Express.
- If you have something to share, write to us at: [email protected]
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